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Little Valley, NY
Phone: 716-938-9133
Email:mdenea@brookslaw.biz

The Ten Most Common Estate Planning Mistakes

1 Over Reliance on Jointly Owned Property
  • Non-spouse jointly property may disinherit intended beneficiaries.
  • Spouse joint property does not qualify for a By-Pass Trust, which is a way to reduce death tax.
2 Over Reliance on Jointly Owned Property
  • The rule is that life insurance benefits are subject to death taxes.
  • Designating the wrong beneficiary can be a disaster.
  • The IRS may treat payment to third party beneficiaries as gifts; and, a surviving spouse may pay a 100 percent tax on this gift!
  • Under certain circumstances, proceeds may not be income tax free.
  • If paid to the estate, insurance is subject to creditors.
3 Lack of Liquidity
  • While the IRS and New York State assess death taxes based on the fair market value of estate assets as of the date of death, the lack of liquidity may force a sale at far below full value.

4 Choosing the Wrong Executor/Trustee

Questions you should ask:

  • Does your choice get along well with the rest of the family?
  • Would there be a conflict of interest if your choice is:
    - A beneficiary?
    - A business associate?
  • Does your choice have the time and commitment to devote to administration of the trust/estate, which includes:
    - Marshalling (identifying, valuing, and recording) the assets.
    - Managing the assets.
    - Paying debts of the decedent and administration expenses.
    - Making distributions to beneficiaries.
    - In probate, accounting to the Court for all principal,
    - income, payments, and distributions.

5 Lack of Adequate Records

  • Poor record-keeping increases the cost of estate administration and can mean assets are lost.

6 Improper Identification & Disposition of Assets

  • When this occurs, the wrong assets go to the wrong persons in the wrong manner at the wrong time.
  • Is it important to treat all of the children (or other heirs) equally or equitably?

7 Errors or Incomplete Terms in Estate Planning Documents

  • Sometimes a person may leave a valid Will or Trust, but errors or ambiguities lead to unintended results. Such errors may cause a portion, or even all, of the person's assets to pass by state law governing interstate distributions, rather than by the terms of the Will/Trust.

8 Leaving Everything to One's Spouse

  • The "All To Spouse" Plan does not help to reduce federal or state death taxes.
  • The rule for using each spouse's death tax exemption amount is simply "use it or lose it". Failure to use it can represent a substantial loss for the family or other heirs.
  • In 2014, it became possible to protect up to $10,340,000 in assets against federal death tax ($4,125,000 million for NYS tax) if proper planning is used for both Husband and Wife; otherwise, there may be substantial taxes due to the federal and state governments on the death of the surviving spouse.

9 Failure to Stabilize & Maximize Asset Values

  • This is particularly true for owners of small businesses and farms.
  • Buy-Sell Agreements are a critical component of an Estate and Business Succession Plan for farmers and business owners.

10 Lack of a Game Plan

Championship teams have a Game Plan and so do Championship families. The game plan should include:

  • Coordination of personal assets, business assets, insurance and retirement benefits.
  • Confirmation of guardianship arrangements for minors or family members with special needs.
  • Consideration of how trust/estate assets are to be managed and distributed upon death.
You can rely on Brooks & Brooks, LLP to oversee your estate plan to ensure you do not fall victim to these or other mistakes.

~Estate Planning with Certainty SM~

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